I'm a fifty-something year old wife, mom to 2 grown kids, and the sole income earner. Follow along as I keep plugging away at daily life.

Friday, June 29, 2012

To have credit or not to have credit

In August it will be 2 years since we filed for Chapter 7 bankruptcy. I think I've talked a little about it in previous posts. For the most part it was debt discharged for my husbands business debts (he was not incorporated). $5300 of it was a personal credit card.

The only debt we currently have is our home mortgage and a home equity loan. I also have a personal loan with my mom for my car that I still owe her about $15000. I make monthly payments to her for this. The only credit card I have is a Macy's. I rarely used it, we didn't owe anything on it at the time of bankruptcy and Macy's didn't cancel it. Now, Penney's on the other hand did. I had used their card regularly over the 30 years I had the account and was never late and didn't owe anything on it when we filed. But they closed it. That is the one card I miss. I never charged much over $100 on it but it was nice to have if a gift was needed and I just didn't have it to spend that month.

Part of me feels this need to "rebuild" my credit but another part of me says NOOOO - stay away from it! On the one hand a credit card sure would be nice for an emergency - on the other hand if Dh knew there was credit available he come up with all kinds of "emergencies". While I feel, on my own, I could very responsibly handle a credit card, especially one with rewards that I could use essentially as a debit card, I do not feel it would be wise to tempt Dh with having a credit card.

At this point what do I really need credit for? We've learned to save first for what we want to buy. And we've learned to buy many things used. A smarter solution than a credit card would be money set aside in an emergency fund (I'm working on that!)- to tap into when needed and repaid - just as a credit card would have to be. We have our home and if we stay here we don't need to try qualify for a new home loan. My main worry is some major house repair will hit (of course it will!) and we won't have the money in savings and have to (again) borrow from my mom, if it's something that can't wait. A credit card to fall back on would be nice.

Several months ago I did try applying for a credit card online. I don't even recall now who it was through (Amazon, maybe?) and was denied. No big surprise there. I should have asked to see our actual credit score then, since we got denied, but forgot I could do that. Since our bankruptcy I have kept track of our credit via creditkarma.com. And it has slowly been increasing. Of course it took a major hit right after our bankruptcy was discharged, then a few months later had pretty big increases. Then nothing for quite a while and small increases every once in awhile. I sometimes read other's blogs that after their bankruptcies they got more credit cards again. I've often wondered how long they had to wait to finally start getting approved or maybe this was during the time when anyone and everyone was getting approved prior to the ecomony fail.

My last look on creditkarma.com I took a look around the website, rather than my usual quick look at our credit scores (mine was 684, dh's was 696). They give a couple of credit cards that have a supposedly high rate of getting approved based on our credit score/history. The first listed one is through Chase. Hmm...our $5300 personal credit card discharge was a Chase card. I'm not sure they'd be so willing to give me another one. But on the other hand our mortgage is through Chase and we have never ever been late on a house payment.

And by applying for credit (and subsequently and most likely getting turned down) I understand that also takes a hit to our credit score. But again, I wonder, should I even be worrying about this at all? Our cash lifestyle is working ok and keeping Dh in check with the spending. But then, I think, that rebuilding our credit score would help if we'd like to refinance our house down the road at some point or actually act on our dream to move to an area where life is a little less crowded and costly.

I also have some concerns/ideas about our mortage and home equity loan, as a result of the bankruptcy, and will do a post about them soon. I'd love to hear other's thoughts on what we should do.

3 comments:

The only reason I would want decent credit is for a mortgage refi. As for credit cards, we only have one which is a secured rewards credit card through Wells Fargo. The only reason we have that is for emergencies and for travel although just lately we have talked about using it for all our household/food spending and paying the balance off in full each month to gain the $$$ rewards. If it's money we'd be spending anyway, we may as well earn rewards on it :) I just don't want to get sucked into debt ever again, especially when the debt I incur is based purely on consumerism (read: hoarding and buying stuff I don't need). It's just so easy for us to spend more than we earn and we have to check ourselves constantly.

Mortgage refi is really the only reason I want decent credit too....but at the same time I am trying to figure out how I go about getting back to decent credit. Would having another credit card (used responsibly, of course) get us on track quicker? I really don't want a credit card, but thought having it on our credit and showing it's paid off regularly might help. Maybe I just need to let time (ie, the bankruptcy getting more and more in our past) take care of rebuilding it.

If DH would be tempted by the card just 'being' I say don't do it. Build your EF and keep living the cash life.You could get a card, just in your name or get it and hide it's existence from DH. This would be a way to avoid the "DH not on the same page w/money/credit" issue but could bite you in the ass if he ever found out....could be the root of major marriage trust issues going forward, so you might not want to go there.

2 years out from a bankruptcy is still early for the powers that be to consider you credit worthy. It's early and you need to be more patient and let the wound heal fully.Most money mavens are saying that rates won't be heading up for a long time still to come, so it's possible you still might get to take advantage of lower re-fi rates, even though your credit score doesn't make you a player yet.